Unleashing Innovation: The Digital Transformation of Personal Loan Business
- Vikas Kumar
- June 17, 2023
- Banking, Financial Services and Insurance, BLOG
- Banking Facilitation System, China Banking System, Digital Banking, Digital Transformation, Digitization of personal loan business, Digitization of personal loan business SHare, Financial Application, Indian Banking System, Personal Loan Business, United States Banking System
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Automation has become part of our society and has penetrated into almost every aspect of our lives, becoming synonymous with savings if either money or time. Digital transformation is one aspect of automation, changing our work processes and how we do business today. Termed as digital transformation, is the implementation of digital technologies embedded across businesses to drive fundamental changes by using AI, machine learning, cloud computing and more to drive faster workflows and smart decision-making.
Adoption of these digital technologies in the lending business has rewarded them with huge margins by just reducing approval times for SME (small and medium enterprises) from 20 days to 10 minutes. Incorporating digital technologies in the approval process allowed lenders to process a higher number of loan originating requests. Improved customer experience with the help of automated digital lending software allows lenders to stand out in front of the lenders’ selected niche or target market.
Digital transformation solutions are different depending on the target market of the lender, as each kind of loan comes with its own specific requirements. Personal loans are sanctioned with a few swipes on a mobile app.
Digital credit– An emerging trend in DFS (Digital financial services), makes use of phone technology, web platforms to register, score, approve and disburse loans to borrowers. Instead of traditional forms of credit, it uses electronic money. Differentiating features of digital credit from other DFS are
- Loans can be applied, approved and distributed remotely.
- Approval is automatic.
- Often it takes less than 72 hours for the approval.
Example of digitization in personal loan business
Nucleus FinnOne Neo Collections– Enables informed decision making through data visualization and business insight generation. The solution focuses on improved lead generation, faster onboarding of customers, comprehensive loan servicing, and efficient fraud detection.
Advantages of digitization in personal loan business
Comparing lenders becomes easy– There has been a rise in new competitors offering comparable loan products and, with the help of digitization, it has become easier to gather information to identify the best lender to choose from.
Online personal loan application– Filling an online personal loan application from any remote location, providing all the necessary documents through the digital platform tremendously enhances customer experience by allowing the customer to remotely apply for the loan, requiring only a few minutes of customer’s time compared to the traditional way of visiting the nearest branch and submitting multiple physical documents.
Online tools– Makes it easier with the help of free tools to calculate EMIs, eligibility of the loan amount, understanding requirements for the various loan repayment terms and a breakdown of the EMIs (principal and interest component) for the selected loan tenure. All these features are intended to improve transparency and allow borrowers to make informed decisions.
Security– Widespread adoption of blockchain technology to protect and maintain a decentralized record in various industries has provided a robust solution for privacy and the prevention of misuse of consumer documents. It provides the necessary digital infrastructure to protect digital data through smart contracts and eliminates risk associated with the submission of physical documents.
Conclusion
Digitization of personal loans has a much wider impact than saving time and money, it transforms the consumer experience positively, increases additional revenue through increased applications, higher win rates, and better pricings. Digitization definitely will continue to make lending simpler and smoother for the consumers.
On the other hand, managing constantly changing regulation rules and building those logics in the software code is a challenge.